Zero hours contracts: workers’ exploitation or a recession buster?

More than 100,000,000 British workers are on zero hours contracts, according to CIPD research. A rapid rise in the use of the zero hours contracts in 2012 attracted a lot of media and government attention over the past months.

There are calls for them to be outlawed on the basis that they are exploitative. Supporters argue they offer greater flexibility to business which is sorely needed in difficult economic times. Zero hours contracts gained popularity after the Agency Workers Regulations 2011 came into force. These regulations entitle temporary workers to the same terms and conditions of employment as permanent staff after 12 weeks of service.

From the HR perspective, zero hours contracts are a minefield.

The key question is whether or not those working under such contracts are defined in law as “employees” or “workers”. “Employees” are afforded a number of important legal rights which “workers” are not, such as the right not to be unfairly dismissed, maternity rights, redundancy rights and rights under the Transfer of Undertakings (Protection of Employment) Regulations 2006.

In the spirit of maintaining workforce flexibility, zero hours contracts are often drafted with the purpose of conferring that the individual’s status in the relationship is that of a worker and not an employee.

Many employers fall into the trap of thinking that they are protected from employment claims because their zero hours workers do not acquire any employment rights.

To many it comes as a surprise that if the day-to-day reality of the work suggests a relationship of employment, the contract will be regarded by an Employment Tribunal as one of employment, and the person working under it will be classed as an employee, notwithstanding the wording of the contract.

If zero hours staffs are de facto employees, they may be entitled to minimum statutory notice periods, company benefits, training and all other privileges that employees get.

It is therefore incredibly important to assess a type of engagement and hence type of contract required, at the outset of the working relationship, in order to avoid any future legal liabilities or grievances.

In a wider context, rather than outlaw the zero hours contracts why not focus on ensuring that the right type of contract is applied to the right working arrangement? There are situations where zero hours contracts are a perfect fit and outlawing them would only worsen workers’ position instead of improving it.